Answer:
Journal Entries
Explanation:
The journal entries are as follows
1. Cash $432,000
To Bonds payable $400,000
To Premium on bond payable $32,000
(Being the issuance of the bond is recorded)
The premium on bond payable is computed below:
= $400,000 ÷ $100 × $8
= $32,000
The $8 comes from $108 - $100
2. Bond payable $400,000
Premium on bond payable $27,809
To Cash $412,000 ($400,000 × 103%)
To Gain on bond redemption $15,809 ($432,000 - $4,191 - $412,000)
(Being the retirement of the bond is recorded)
